Follower notices

From 17 July 2014, HMRC can issue notices requiring taxpayers to amend their Tax Returns where:

• •the Return is subject to an ongoing enquiry or appeal, and
• •there is a final judgment (which includes a decision in the First-tier Tribunal which is not appealed) in a tax case which HMRC is of the opinion applies to the taxpayer's situation

FA 2014, ss 204-205

The penalties for failing to amend the Tax Return following receipt of a notice can be as much as 50% of the tax at stake and will apply in addition to any other penalties due up to a maximum of 200% of the tax (higher maximum percentages apply where an offshore matter is involved). For more on offshore matters, see the Penalties for offshore matters guidance note.

The taxpayer must decide whether he should:

• •accept the follower notice, amend the Tax Return and pay the tax due (plus interest and penalties), or
• •continue with the enquiry / litigation and appeal the penalty charged by HMRC for failing to take corrective action on receipt of a follower notice

If the taxpayer takes the second option he will have to pay not only the tax but also a penalty of up to 100% of the tax (higher if there is an offshore element involved) if he:

• •loses the litigation on the tax advantage issue, and
• •loses or abandons the litigation on the penalty for failure to take corrective action

If the